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Howell: Concerns about Plains crops underpin cotton rally

Concerns about the effects of cool temperatures and excessive rains on crops in the Texas High and Rolling Plains underpinned moderate marketing week gains on light trading in cotton futures.

December gained 72 points for the week ended Thursday to close at 68.97 cents, rallying from 67.86 cents on Sept. 22 – lowest intraday price since Aug. 22 – to 69.73 cents on Tuesday. With one trading day left in September, December had lost 196 points or 2.8 percent for the month.

Trading dwindled to 12,800 lots a day by midweek, among the smallest daily volumes of the year. This suggested that weather concerns seemed to have inhibited selling more than stimulating fresh buying. Open interest coming into Thursday had declined 5,196 lots from a week ago to 233,507.

The approach of stepped up harvesting of the Northern Hemisphere crop may have affected the sentiments of some mills.

March gained 47 points to settle at 68.05 cents. Maturing October, which entered its delivery notice period on Monday with an open interest of 120 lots, hasn’t drawn any notices and hasn’t traded for four straight sessions. Its last trading day is Oct. 9.

Cash online sales increased to 6,479 bales from 2,407 bales on The Seam. Prices averaged 66.61 cents, compared with 66.01 cents the prior week. Premiums over loan repayment rates dipped to an average of 15.08 cents from 15.77 cents. Loan values on the turnover rose to 51.53 cents from 50.24 cents.

Concerns about the Plains crop added to uncertainties about the earlier impact on cotton in South Texas, the Delta and Southeast from Hurricanes Harvey and Irma.

A return to protracted warm, sunny weather could help minimize the effects of the cool, rainy period on the quality and quantity of a High Plains crop projected on the basis of conditions around Sept. 1 at an all-time high of 5.695 million bales.

But not a lot of time is left to make up for the slowdown in fiber maturity under normal fall temperatures and with days getting shorter. The normal first fall freeze date at Lubbock is Oct. 31. The earliest on record is Oct. 7, 1952, and the latest is Nov. 23, 2003.

U.S. cotton crop conditions dipped slightly for the week ended Sunday, with good to excellent falling a percentage point to 60 percent, up from 48 percent a year ago, USDA’s progress report showed.

Poor to very poor remained at 14 percent. The DTN cotton condition index eased a point for the week to 143 and was up from 122 a year ago.

Texas ratings improved slightly as good-excellent edged up a point to 59 percent and poor-very poor held at 14 percent, same as the national percentage. Last year, good-excellent was 42 percent and poor-very poor 20 percent. Boll opening at 45 percent and harvesting at 21 percent were up six points and eight points, respectively, from the averages.

On the demand scene, U.S. weekly all-cotton export sales for shipment this season of 209,800 running bales lifted 2017-18 commitments to 7.525 million RB. Despite a sales dip for the week, commitments widened the lead over cumulative sales a year ago by 97,000 RB to 2.206 million or 41 percent and were 51 percent of the USDA export forecast.

Shipments slowed to 137,900 RB, bringing the season’s total to 1.304 million, 119,000 RB behind last year. Exports were 9 percent of the USDA forecast, compared with 10 percent a year ago.

To achieve the projection, shipments now need to average roughly 298,900 RB a week, while sales averaging approximately 157,500 RB would match the export forecast.

Slowed sales for shipment next season of 8,500 RB brought 2018-19 commitments to 745,100, up from 428,000 RB in forward sales a year ago.

On the international scene, China’s cotton imports rose 20 percent last month from a year earlier to 385,405 480-pound bales and were up 36 percent for the calendar year to 3.729 million bales.

The USDA’s latest estimate of China’s imports for the 2017-18 cotton marketing year ending July 31 is 5.1 million bales, compared with 5.03 million last season.

Conjecture has circulated about potential stockpile purchases by China, the world’s largest cotton consumer, in the months ahead following conclusion of the latest round of auctions at the end of September.

The buying would involve both domestic and foreign cotton supplies. China’s imports in 2016-17 remained quota-constrained and reserve sales injected some 14.3 million bales into private supplies.

Yet the U.S. market share in China recovered from the extreme low of 2015-16. And U.S. exports are expected to figure prominently in 2017-18, with China’s mill use accounting for about a third of the global total.

They liquidated 6,473 longs and covered 454 shorts in a week in which December edged up 16 points after losing 577 points the prior week. This followed three straight weeks in which they had increased their net longs. Index funds pared their net longs 638 lots to 73,418, while non-reportable traders flipped to net short 297 lots from net long 571 lots.

Separate CFTC data showed mills boosted their unpriced on-call position to a record high for the fourth consecutive week, raising it 1,435 lots to 134,084 during the week ended Sept. 22. Producers added 532 lots to hike theirs to 57,699 lots. The net call difference widened 903 lots to 96,385, which was 40.1 percent of the declining open interest.

Duane Howell is retired farm editor of The Avalanche-Journal. He writes daily cotton market reports for DTN/Progressive Farmer. His e-mail address is duane.howell@sbcglobal.net.